The recent collapse of financial markets plunged economies around the world into recession. The series of events following the downfall of Lehman Brothers last September scripted an unprecedented chapter in economic history. Whether it was enormous bail-out packages, monetary policy or quantitative easing, economies around the world took expansive steps to stay afloat.

This leaves us in a very sensitive and interesting position today. Is the worst over? With US Federal Reserve chief Ben Bernanke declaring the end of the recession, will we see dissipating unemployment, growing GDPs and bullish stock markets? And most importantly, what changes, if any, will we see in economic policy? American economist and Nobel laureate, Edward Prescott, answers such imminent questions in his talk "The current state of the economy" at the LSE.

Edward Christian Prescott is a Professor at Arizona State University and shared the Nobel Prize for economics in 2004 for his work on the time consistency of economic policy and the driving force behind business cycles. As Prescott puts it in his prize speech at Stockholm, his paper 'Rules rather than discretion: The inconsistency of optimal plans' "transformed macroeconomic policy." Prescott also asserts the "evolution" of macroeconomics "from constructing a system of equations to an investigation of dynamic stochastic economies." It was after his joint research with Robert Lucas entitled "Investment under uncertainty" did Prescott abandon this system of equations approach. Today, he says, the question is not "what policy action is best", but rather "what policy rule to follow."

Interestingly, Edward Prescott was among the 100 economists who signed a statement criticizing Obama's proposed economic reforms during the US presidential elections. Prescott further went on to oppose Obama's American Recovery and Reinvestment Act in January 2009. An expert in the theory of business cycles and general equilibrium, Edward Prescott will give his interpretation of the precarious state of today's economy in his talk.

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